Spousal IRAs: A Tax Advantage for Couples With One Earner

Many couples mistakenly believe a spouse who does not work cannot open an IRA, so they contribute to just one retirement account and stop there. In reality, federal tax law has long allowed a working spouse’s income to support contributions for a spouse with little or no earnings, and overlooking that rule can leave valuable tax savings untouched.

That misunderstanding is common among married couples approaching retirement. One spouse may have retired early, shifted to part-time work, or spent years managing the home, leading the couple to assume only the wage earner can save in an IRA.

But the law permits a joint-filing couple to use the working spouse’s compensation to fund an IRA for the other spouse. For 2025, the contribution limit was up to $7,000 per spouse, or $8,000 for each spouse age 50 or older. For 2026, the limit increases to $7,500 per spouse, or $8,600 for each spouse age 50 or older.

How the Kay Bailey Hutchison Spousal IRA Works

The official name of this provision is the Kay Bailey Hutchison Spousal IRA, found in 26 U.S.C. § 219(c) of the Internal Revenue Code. As a general rule, IRA contributions cannot exceed a person’s own taxable compensation, such as wages, salary, or net self-employment earnings.

Section 219(c) creates an exception for married couples filing jointly. Under this rule, the lower-earning spouse may use the couple’s combined compensation, reduced by any amount the higher earner contributes to a traditional or Roth IRA, to determine the contribution limit. According to IRS Publication 590-A, the spousal IRA limit is the lesser of $7,000, or $8,000 if age 50 or older, and that combined compensation figure. In total, a couple could contribute as much as $14,000 for 2025, or $16,000 if both spouses are age 50 or older. For 2026, the limit rises to $7,500 per spouse, or $8,600 for each spouse age 50 or older.

The account is held in the non-earning spouse’s name only. IRS rules require each spouse to calculate eligibility separately, even in community-property states.

Choosing Between a Traditional and Roth Spousal IRA

A traditional IRA can provide an immediate tax deduction. If neither spouse is covered by a workplace retirement plan, joint filers may deduct the full contribution regardless of income.

When workplace coverage enters the picture, the deduction phases out over a range of income and then disappears. If one spouse is covered by a workplace plan and the other is not, the deduction for the non-covered spouse’s spousal IRA phases out for 2025 when modified AGI is more than $236,000 but less than $246,000. For 2026, that range shifts to more than $242,000 but less than $252,000. The covered spouse’s own deduction phases out much earlier, between more than $126,000 and less than $146,000 for joint filers in 2025.

IRS Publication 590-A explains how these rules can differ for each spouse. For example, a covered earner in a couple with combined modified AGI of $238,500 would not be able to deduct his or her own IRA contribution, while the non-working spouse could still qualify for a partial deduction on a spousal IRA. Any nondeductible amount must be reported on Form 8606.

A Roth IRA works differently. There is no upfront deduction, but qualified withdrawals later can be tax-free. For 2025, joint filers with modified AGI below $236,000 could make the full Roth contribution. The amount phases out between $236,000 and $246,000 and disappears entirely at $246,000 or above.

Catch-Up Contributions Can Boost Late-Career Savings

Catch-up contributions let savers add extra money once they turn 50. The IRS also said in the 2025 edition that beginning in 2026, the IRA contribution limit rises to $7,500, or $8,600 for people age 50 or older.

There is no age cutoff for eligibility. Traditional IRA contributions remain deductible regardless of age, so even an older spouse can still receive contributions while the other spouse continues working.

The main advantage is that the non-earning spouse gains a separate tax-sheltered account. In a traditional IRA, investment growth is not taxed until money is withdrawn. That can be especially useful for households where most savings are concentrated in one 401(k), particularly when cash reserves are tight. According to Bureau of Economic Analysis data, the personal saving rate was 4.4% in the second quarter of 2026, down from 6.9% in the first quarter of 2024.

Three Errors That Can Undermine the Benefit

1. Filing separately. The spousal IRA rule requires a joint return. Married couples filing separately who lived together also lose Roth eligibility once modified AGI reaches $10,000 or more.
2. Contributing more than the couple earned. Total IRA contributions cannot exceed the couple’s taxable compensation. If excess money remains in the account after the filing deadline, including extensions, a 6% tax applies each year the excess stays in place.
3. Missing the deadline. Contributions count for a tax year only if made by the tax return deadline, excluding extensions. For 2025, that deadline was April 15, 2026. Money deposited between January and the deadline should be clearly designated for the intended year, or the custodian may treat it as a current-year contribution.

Using One Paycheck to Fund Two Retirement Accounts

A spousal IRA requires only a new account and a joint tax return. For couples living on one income, it creates a second tax-advantaged retirement bucket that federal law has long allowed. Whether a traditional IRA deduction now or Roth tax-free withdrawals later is the better choice is a decision best made with a qualified tax professional before the next filing deadline.